ForexVue
Level 2 · Lesson 11 of 14 · 4 min read

Swap and Rollover: The Cost of Holding Overnight

Hold a trade past 5pm New York time, and you pay or earn a daily fee.

Laurent Researched and written by

What Is Swap?

Every currency has an associated interest rate set by its central bank. When you hold a forex position overnight, you're essentially borrowing one currency and holding another. The swap (or rollover fee) is the interest rate differential between the two currencies.

If you buy a currency with a higher interest rate than the one you're selling, you receive swap (a small daily credit). If you buy the lower-rate currency, you pay swap (a small daily debit).

Swap Example: AUD/JPY (illustrative rates from 2024)
AUD rate (RBA, 2024):4.35%
JPY rate (BOJ, 2024):0.25%
Differential:+4.10%
Long AUD/JPY = you EARN swap daily 💰
The Reverse: Short AUD/JPY (same illustrative rates)
You borrow AUD (4.35%)
You hold JPY (0.25%)
Short AUD/JPY = you PAY swap daily 💸

These rates are a snapshot from 2024, used here only to illustrate the mechanics. Central banks change rates several times a year, so a swap differential can shrink, grow, or even flip sign: always check the current central bank rates and your broker's live swap table before relying on a swap calculation.

Triple Swap Wednesday

Forex settles on a T+2 basis (2 business days after the trade). A trade held Wednesday through Thursday actually settles over the weekend (Thursday + Friday + Saturday + Sunday). To account for the weekend when no settlement occurs, Wednesday night swap is tripled.

This means holding a position from Wednesday to Thursday costs (or earns) 3x the normal swap rate. Some traders specifically avoid holding positions over Wednesday night for this reason.

Islamic/Swap-Free Accounts

Islamic finance prohibits earning or paying interest (riba). Many brokers offer swap-free accounts for Muslim traders. Instead of daily swap charges, these accounts may have wider spreads, fixed monthly fees, or limited holding periods.

Practical impact: For day traders who close all positions before 5pm EST, swap is irrelevant. You only pay swap if you hold overnight. For swing traders who hold positions for days or weeks, swap can add up. Always check the swap rates for your pair before entering a longer-term trade.
✅ Check your understanding
Swap (rollover) is charged or credited every time you hold a position past 5pm New York time.
✅ Check your understanding
Why is the swap on Wednesday typically 3x the normal amount?

Key Takeaways

  • • Swap is a daily fee (or credit) applied when you hold a position overnight past 5pm EST.
  • • Swap is based on the interest rate differential between the two currencies.
  • • Triple swap is charged on Wednesdays to account for the weekend.
  • • Islamic/swap-free accounts are available for traders who cannot pay or receive interest.
Glossary: Swap Glossary: Rollover
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